BlueHippo—it was a catchy name and a great logo. You might have been okay buying their coffee mug or even the boxer shorts they peddled on their website. But the company’s primary business was selling computers and other electronic equipment over the Internet to people with low incomes and impaired credit. If you were one of those customers, you’re probably still regretting it.

The BBB issued our first local warning about BlueHippo in 2004 and the BBB system issued a nationwide alert in 2007. The company was sued by the Federal Trade Commission and numerous state Attorney Generals. At one time, the FTC had over 8,000 pages of complaints about BlueHippo; the number is probably much higher now. BlueHippo filed for bankruptcy in November when its payment processor froze its accounts after reading an FTC press release that BlueHippo said was “replete with factual inaccuracies.”

Even though BlueHippo is apparently on its way out of business, it offers valuable lessons for consumers who may be enticed by offers from similar companies that are still operating. Two of them are Guaranteed Consumer Funding and Tronix Country, both of which have an F rating with the BBB based on complaints and practices similar to BlueHippo’s. I saw a primetime commercial for Tronix Country on a local TV station recently.

BlueHippo is located in Maryland but advertised its offer nationwide via the Internet, TV and newspapers. It sold computers and other electronic equipment on a hybrid layaway and installment payment plan to financially strapped consumers. Its newspaper ads touted “New Computer – Bad Credit? No Credit? No Problem! Guaranteed Approval.” Consumers who signed up to make weekly payments for a year were supposed to receive their equipment after making the first 13 payments.

BlueHippo customers complained to the BBB that they never received their computers after making the required number of payments, that they paid up to four times the price they would have paid at a local store, and that they never received free plasma TVs that were supposed to accompany their computers. The FTC alleged that BlueHippo continued to deceive consumers after it entered into a court approved agreement to revise its practices. The FTC found that 35,000 consumers contracted for BlueHippo’s financing deal during a nine-month period in 2008, but the company only shipped one computer.

Consumers can take away a number of lessons from the long and sordid history of BlueHippo. First, they should ask themselves why a company in a faraway state will lend them money to buy a computer if a local retailer or lender won’t. I’m not suggesting there aren’t legitimate Internet lending deals. But they require closer scrutiny, which brings us to the next lesson. Check out companies like this (actually, any company) with the BBB. While tens of thousands of people were victimized by BlueHippo, many more were saved from grief because they pulled the BBB’s report on the company and saw its F rating and the many government actions filed against it. Finally, be sure you fully understand a company’s refund policy and the terms of any financing agreement.

Ken Vander Meeden, local BBB of Western Michigan P esident, noted, “Free MP3 player, free printer, and free plasma TV if you order a computer with your bad credit should be a red flag to most reasonable consumers. Given the poor performance of numerous companies for these misleading offers, we also alert media to be more selective in accepting advertising from bad performers.”